A UK parliamentary committee has urged an immediate ban on crypto donations to political parties, but at least one industry expert warns the move could backfire, creating new cybersecurity risks even as lawmakers seek to curb foreign influence.
The cross-party panel said the government should amend the Representation of the People Bill, entering committee stage on Wednesday, to prohibit such donations until stronger safeguards are in place.
The report forms part of a broader push to tighten political finance rules ahead of the next general election, amid growing concerns over illicit funding and foreign interference in UK politics.
“The Government must immediately ban political donations made through crypto until firm rules can be developed,” the committee said, warning that “the perception of foreign money shaping politics is increasingly corrosive.”
Issues at hand“The only thing stricter donor KYC rules or an outright ban will accomplish is introducing new crypto vulnerabilities by forcing political parties to maintain personal data…in centralized databases,” Kadan Stadelmann, Komodo Blockchain founder and cybersecurity expert, told Decrypt.
“This constitutes a massive honeypot over which the UK’s adversaries would drool,” he added.
Stadelmann pointed to the 2024 breach of U.S. President Donald Trump's campaign servers and the 2016 hacks of Hillary Clinton and the DNC as precedents.
"This proposed 'fix' would be the envy of ransomware hacking groups and other nefarious online actors," he said, noting that only "a truly decentralized architecture secured with cryptography" could achieve parliament's stated goal.
In its report, the committee heard expert views, with Ian Taylor, Board Adviser at CryptoUK, saying crypto can be transparent within regulated systems, while Tom Keatinge, Director of RUSI’s Centre for Finance and Security, warned a ban may push activity offshore without addressing underlying risks.
The report concluded that while crypto can provide transparency and traceability, current oversight is inadequate, warning “the opportunity to evade rules is too high.”
